When it’s time to buy a vehicle, you’re going to need to bring in documentation to complete the car buying process at a dealership. If you’re buying a vehicle with a subprime lender, you’re going to need to provide even more documents to qualify for an auto loan.
Traditional Lenders vs. Subprime Lenders
Traditional lenders often require you to bring in basic documents, such as your driver’s license and proof of insurance when you're picking up a car. Their main focus when determining loan approval is your credit score. Traditional lenders, however, typically don't work with people who have poor credit.
Subprime lenders do work with people who struggle with credit issues. They ask for the same basic documentation as traditional lenders, but they don’t place such a heavy emphasis on your credit score. These lenders rely on other factors that help prove your ability to successfully complete an auto loan. Because of this, they need further documentation to ensure you meet their qualifications.
Required Documents for Bad Credit Auto Loans
Since subprime auto lenders look at multiple factors, including your credit score, to determine approval, you need to prove you’re able to pay back a loan. To do this, you need to bring in these four things in addition to your license and proof of insurance:
- Proof of income – A recent computer-generated pay stub showing your year-to-date income. Most subprime lenders like to see an income of at least $1,500 to $2,000 a month, pre-tax. If you’re self-employed or an independent contractor, you typically need to bring in two to three years of recent tax returns to serve as proof of income.
- Proof of residency – A recent utility bill in your name at the address listed on the application. A PO Box doesn’t work.
- Proof of a working phone – A recent phone bill in your name at your address. It can either be a landline or contract cell phone; no pre-paid cell phones.
- Personal references – Have a list of six to eight personal references not living with you, complete with names, addresses, and work/personal phone numbers.
In addition, you must have a down payment ready to show a willingness to invest in your loan. The minimum amount needed varies by lender, but subprime auto lenders typically ask for $1,000 or 10 percent of the vehicle’s selling price, the lower amount being acceptable. Keep in mind that if you’re able to make a bigger down payment, you should. The more money you put down, the less you end up paying in interest expenses. You can either make a down payment in cash, trade-in equity, or a combination of both.
Ready to Start the Financing Journey?
If you’re ready to start the car buying process, but don’t know where to find a subprime lender to work with, let CarsDirect help. We work with a large network of dealers from coast to coast that has the lending resources available to help people in many different credit situations. To see what we can do for you fill out our online auto loan request form, and we'll get to work matching you with a local dealership!
